Making the Case for Personal Financial Literacy Education

Transcription

1 Making the Case for Personal Financial Literacy Education Aaron Standish Financial Literacy Coordinator, SDPBC The need for financial literacy education has never been greater. The time is now.

2 THE SITUATION: Debt incurred by teenagers has been steadily rising. 33% of all teenagers have already incurred debt. 1 Only 59% of Generation Y (18-21year olds) pays their bills on time every month. 2 50% of college students have 4 or more credit cards; $3,173 is the average balance. 3 71% of graduating college seniors have student loan debt. 4 The average student loan debt for an individual, as of August 2014, is $33, The amount of student loans taken out has increased 362% between 2003 and Teenagers want to be financially literate. 86% of teens would rather learn money management in class before making mistakes in the real world. 6 84% of college students cited personal finance and money skills as the one subject they wished they had learned while in high school. 3 76% of teens report the best time to learn about money management is in kindergarten through high school, but only 29% of those teens had programs currently in place in their schools. 7 Parents/adults want financially literate children. Only 5% of adults say they learned about money matters from a teacher, while 85% of those adults thought a course in personal finance should be a graduation requirement. 8 The average age at which American adults feel people should be required to start learning financial literacy: % of teens think they will be age before becoming financially independent from their parents, up from 12% in % of parents with kids in high school give schools below-average grades in teaching kids responsible spending, 35% gave schools an F. 10

3 Community stakeholders and business owners want financially literate children. Lost economic activity resulting from the Great Recession of : $14 trillion % of employers now use credit reports as a screening process for job applicants % of recent college grads are delaying buying a house for financial reasons, versus 22% who graduated 7-plus years ago % of recent grads are delaying having children for financial reasons, versus 13.5% among those 7-plus years out of school. 12 Less than 11% of people under 35 participate in their company s 401k plan. 31 The United States lags behind in teaching children financial literacy. The United States has one of the lowest opinions of its teenagers money management skills, with 70.5% saying that U.S. teens don t understand money management basics. 9 A recent international assessment of financial literacy concluded that United States teenagers (15-year-olds were measured) were slightly below average compared to those in other countries. 17.8% of U.S. respondents didn t even reach the baseline level of proficiency. 13 States, including Florida, are starting to recognize the importance of a financially literate populace. 35 states currently require personal finance standards to be implemented (up from 28 in 2002), 17 states require a high school course on personal finance to be taken (up from 7 in 2002), and 6 states mandate student testing of personal finance (down from 9 in 2002). 14 Florida passed SB 1076 in 2013, requiring financial literacy to be included in high school graduation requirements, as part of a required credit in economics. In June 2014, Florida added a new Financial Literacy strand to existing Social Studies standards in grades 4, 8, and 9-12.

4 THE CHALLENGE: Schools are graduating students unprepared for the financial challenges that await them. Only 24% of students feel well-prepared to deal with financial challenges after graduation % of teens plan to attend college, but 51% are not saving to help pay for college. 16 Children who have college savings accounts are almost 7 times more likely to attend college than children without an account. Having a savings account was a better predictor of whether a child would attend college than race or parents wealth. 17 Students expect to earn $70,000 per year upon graduation from college, and $150,000 once they become established in their careers. 6 76% of young adults keep no record of what they spend. 18 1/2 of high school senior girls shop for 2 weeks or more to pick out a prom dress, 1/2 of senior boys spend 2 weeks or more deciding whom to ask for prom; while 1/2 of all high school seniors spend fewer than 5 total hours learning how to pay for college % of people believe winning the lottery is the best strategy to accumulating wealth. 20 Parents/adults are not actively teaching financial literacy skills at home. American families talk to their kids about finances on an average of 25.8 days a year. 9 Only 33% of parents talk to kids about money more than once a week % of teens haven t developed a budget with parents for spending and saving % of teens have never talked with their parents about paying for higher education. 7 20% of parents involve their teen in family budgeting decisions to a great extent, so they can learn by doing % of high school seniors said parents were their primary resource for personal finance knowledge, but only 22% said they talked to them frequently about it % of parents do not have a financial plan to pay for all years of college prior to the student enrolling % of parents claim to save regularly for vacation, while only 41% save regularly for their kids college education % of parents admit to feeling less prepared to give their teens advice and guidance about money than they do the birds and the bees. 26

5 THE BENEFITS: Cumulative financial education leads to an increase in financial knowledge and smarter future money habits. Students graduating from high schools in states that require personal finance education have higher savings rates and net worth as a percentage of their earnings than individuals graduating from high schools in states where financial education is not mandated. 27 Students who have had a financial education class in school participate more often in retirement programs and make larger contributions to the program. 27 An evaluation of the NEFE High School Financial Planning Program found that students who studied the program reported significant improvement in their financial knowledge, behavior, and confidence. A 3-month follow-up survey indicated that 60% of students had changed their saving patterns, and that 59% changed spending habits by only purchasing things they really need. 28 Teachers who are trained in financial literacy workshops have higher student achievement. Students who are in classes where a teacher has been trained how to use the Financial Fitness for Life curriculum from the Council on Economic Education show significant improvement in assessment scores. 31 In the state of Virginia, 900 teachers have specifically been certified to teach financial literacy, and now 92% of their students pass the end-of-course assessment in financial literacy. 31

6 THE CONCLUSION: Why are personal financial literacy courses needed? Financial literacy courses teach essential skills crucial to success in life. Students need tangible skills to make responsible and effective financial decisions on a daily basis and in the future. Improved financial literacy results in a higher standard of living over the long term. Financial literacy courses set a strong foundation for students to become informed consumers who play positive roles in the community. These issues affect more than just one person they affect the bottom line for businesses, economic stability of our nation, and the future of a whole generation. What is needed NOW for financial literacy initiatives to succeed: Comprehensive standards for K-12 A stand-alone course in personal financial literacy High-stakes testing, such as an end-of-course assessment Continuing professional development for teachers

7 Research Cited 1Charles Schwab. Teens & Money Survey National Foundation for Credit Counseling Financial Literacy Survey. 3 Sallie Mae. National Study of Usage Rates and Trends of Undergraduate Student Credit Card Use. April The Institute for College Access & Success. Student Debt and the Class of Federal Reserve Bank of New York. Household Debt and Credit Report Charles Schwab. Teens & Money Survey Junior Achievement. Teens and Personal Finance Survey Visa. Practical Money Skills For Life Survey Kiplinger s Personal Finance Magazine. Global Financial Literacy Barometer American Express. Spending and Saving Tracker Society for Human Resource Management survey College Savings Foundation. Survey of College Graduates Organization for Economic Co-operation and Development. Program for International Student Assessment Council on Economic Education. Survey of States Hartford Financial Services Group, Inc. survey Capital One. Back-to-School Survey Center for Social Development. Role of Savings and Wealth in Reducing Wilt between Expectations and College Attendance University of South Florida. Financial Literacy 101 Course Case Study Sallie Mae. Survey of high school seniors Consumer Federation of America and The Financial Planning Association survey Capital One. Back-to-School Survey Charles Schwab. Teens & Money Survey Capital One. Survey of high school seniors Sallie Mae. How America Pays For College Survey T. Rowe Price. Parents, Kids, & Money Survey Charles Schwab. Parents & Money Survey Department of Treasury. Integrating Financial Education into School Curricula Danes, Sharon. Evaluation of the NEFE High school Financial Planning Program. Financial Counseling and Planning, Volume 18, Issue 2, Nerdwallet.com. Average Household Credit Card Debt Statistics: Federal Reserve Bank of Dallas. How Bad Was It? The Costs and Consequences of the Financial Crisis. July Mace, Lesley. Federal Reserve Bank of Atlanta Jacksonville Branch. Florida Financial Literacy Summit: A Call for Education. August 2013.